Adult Family Home

[jainen]

Before you sign

>>make an allocation for personal use of the home<<

Before you sign your name to such a curious interpretation of the rules about business use of home, I recommend you do better research than just an Internet forum. Start with Section 131, which is pretty specific about foster care payments. I'm not sure where you can look for authority to un-exclude that income and it's related expenses, so ask Black Bart and JJ how they support their positions.

[JON]

I do not know

but the state I would think know if it was a non taxable payment.. I only had one a long time ago and they never received anything on a 1099.? fcr foster..

[JJ EA]

Include income?

As Jainen said you need to read code section 131. That section clearly states that qualified foster care payments made for qualified foster care individuals are excluded from gross income. I didnot mean to imply that a taxpayer could choose to include the payments and take expenses against that income and create a loss. I think probably not.

At the bottom of my first post I suggested that an adjustment be made on the Sch C to zero out any loss after listing the expenses with an explanation "expenses all allocated to tax-exempt income". My reason for doing a Sch C in this instance was to track expenses and to get the client used to business reporting. The more I think about this, I realize this would be an unusual Sch C.

I still feel that an allocation of mortgage interest and RE tax should be made because he has converted part of his home to business property and is receiving income (although nontaxable income at this point) from the use of that portion. It sounds like he intended to start a business and make a profit.

Jainen, I have great respect for your knowledge and experience. What would you do?

[jainen]

my knowledge and experience

As for my knowledge and experience, I'm with Black Bart. "I never heared of sich a thing!"

But after looking it up, I would exclude the income (and related expenses) until he has more than five residents or he moves back into his old house. At that time I would evaluate his circumstances as to whether he is operating a business, using the normal 20 factors. I would offer him a consultation about business records and the more complex tax issues he could take advantage of (just not this week or next!)

[Harvey Lucas]

But what about Mortgage Int and taxes

I would exclude the income (and related expenses) until he has more than five residents or he moves back into his old house.

Thank You Jainen,

I now am inclined to exclude the income...he had only 3 adults, and they were all qualified as fostercare individuals.

But what about his Mortgage interest and property taxes?

I'm now inclined to claim 100% on Sch A...it is his main home..the income is excluded becuase of a specific provision that excludes it....is there a specific provision that says if you exclude this income you now lose the bene of your interest and prop tax deduction..that would seem unlikely...ie...they apparently are trying to give a break to the kind souls who would house elderly adults for a pitence of pay...I find it hard to imagine that they would take the bene away with a comeback that says, "oh, by the way, you now are not eligle to claim the most basic of basic time honored deductions, ie the interest and taxes on your home"

Exclude the income, and put 100% of the interest and property tax on Schedule A, agreed?.

HarveyLucas

[Black Bart]

Strange to the strange

Before you sign your name to such a curious interpretation of the rules...
ask Black Bart and JJ how they support their positions.

JJ! And the rest of you boys! Stop feedin' that gargantuan ego with such unbounded adulation. He's eatin' it up with a spoon. That boy doesn't hang his pants on a nail and jump into them every morning--he puts 'em on one leg at a time just like we do. Get up some guts and cut out all the shuckin' and jivin' to him--stick to your guns. Remember you're EAs (or somethin' like that) and were once men to be reckoned with.

CURIOUS: What's curious about it? And who ever said I had any "support" for my "position?" I just said to do it. What do you think will look stranger to the clerk (not Sandra Day O'Connor) that's handling the return--a schedule "C" or an excluded $23K? Why do you think ggd's "sick pay" case got "ignored" (I defer to your definition)? Because the clerk was overly familiar with it?

Knowledge and experience? Why, just the other day, the Donald himself (strike that); I mean "the Sova" himself said that I was worth at least another $5 per return next year. I take that as the last word in compliments.

For further information please refer to my note to you under the "Amended Returns" thread at the bottom of the page.

Best regards, BB

[jainen]

deduction!

>>100% of the interest and property tax on Schedule A<<

One of the key points of the exclusion is that it IS his home. As every clergyman knows, it's perfectly legal to take a deduction for home mortgage interest and taxes regardless of the source of funds. It doesn't matter if you use excluded income, an inheritance, Roth IRA earnings, muni fund interest--it's your money and if you pay deductible expenses you get the deduction!

[Black Bart]

Put 'em up! Put 'em up!

>>100% of the interest and property tax on Schedule A<<

Humoring the drunk, eh? Okay you dirty, rotten, low-down, inexcrupulous rat (I'll bet you probably do RALs too). From now on I'm not givin' you any tips on how to get around the law. You'll just have to do it all accordin' to the Code and Hoyle.

[Black Bart]

Maintaining a low-profite, huh?

>>100% of the interest and property tax on Schedule A<<

I just hate it when you won't pull your dueling pistols. I know--I know, you don't see anything of substance to argue about, but remember this--tax preparers do not live by Code alone; they must occasionally have bread.

[jainen]

stay off the forum

>>pull your dueling pistols<<

Unfortunately I have a serious disability that prevents me from responding during daylight hours. It takes every ounce of my strength just to move all the files from one stack onto the other. And I have to keep moving them back and forth for 13 more days.

Now, Black Bart, I have been trying to be a little nicer. Yesterday I even quoted YOU as an authority on not knowing things. We have had our disagreements, to be sure, but I always felt that you were a man of your word, and I distinctly remember you once promised to "change that to JILTIN', rotten, low-down, inexcrupulous rat." It was back in December in the thread where I garnered all sorts of compliments by saying I would stay off the forum a while.

[Unregistered]

We do the business use of home based on the square footage that is used exclusively by the family as a reduction of the total square footage to arrive at square footage for business use.

That is exactly backwards. Other than for daycare only the clients exclusive use areas are business.